2026 (3) TMI 377 - AT - Income Tax

TDS credit later substantiated by challan and Form 27Q extinguished assessment demand, nullifying related penalty.

TDS credit claimed by the assessee was substantiated by production of the TDS challan and later reflection in Form 26AS after the deductor filed Form 27Q, ... Penalty levied u/s 270A - assessee had claimed TDS in respect of the sale of immovable property but challan was not reflected in Form No. 26AS at that time - TDS challan was produced, Form 27Q was later filed by the deductor - deductor had not filed Form No. 27Q, the corresponding TDS credit was not reflected in Form No. 26AS at the relevant time. HELD THAT: - The Tribunal found that the assessee had produced challan evidence showing the TDS was deducted and deposited by the purchaser, but the credit was not reflected in Form 26AS at the time of assessment because the deductor had not filed the requisite form. The assessing officer rejected the TDS claim without undertaking independent verification. Subsequently, the deductor filed the required form and the TDS amount was reflected in Form 26AS; the assessee also filed a rectification petition. As the department did not contest these factual developments and, upon giving due credit of the challan, no outstanding demand survived against the assessee, the existence of the penalty could not be sustained. The Tribunal, therefore, concluded that imposing penalty under section 270A was unsustainable where the tax credit was established and no demand remained. Penalty under section 270A deleted as the claimed TDS is now reflected in Form 26AS and no demand survives. Final Conclusion: The appeal is allowed - impugned appellate order is set aside and the penalty levied u/s 270A is deleted because the claimed TDS has been established and there is no outstanding demand for Assessment Year 2018-19. Issues: Whether the penalty levied under section 270A of the Income-tax Act, 1961 is sustainable where the assessee had claimed TDS which was not reflected in Form 26AS at the time of assessment but the TDS challan was produced, Form 27Q was later filed by the deductor, the TDS credit subsequently reflected in Form 26AS and a rectification petition was pending.Analysis: The assessee produced the challan evidencing deposit of TDS and later produced the updated Form 26AS showing the disputed TDS credit. The appellate record shows that the deductor filed the required Form 27Q after the assessment and appellate orders, and the department had a pending rectification request supported by the challan. No material was placed on record by the revenue to controvert the challan, the subsequent reflection of TDS in Form 26AS, or the factual contention that granting credit would extinguish the demand. The penalty under section 270A was imposed consequent to the assessment demand which, on grant of the TDS credit, would not survive.Conclusion: The penalty levied under section 270A of the Income-tax Act, 1961 amounting to Rs. 1,07,620/- is deleted and the appeal is allowed in favour of the assessee.